MPSC Readies For Electrical Deregulation

May 20, 2002
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LANSING — As the end of the year and the onset of electricity rate deregulation approach, the Michigan Public Service Commission (MPSC) seems to be in a scramble.

In the last few days, the MPSC has sent out a number of formal announcements about new policies keyed to deregulation of electrical prices, which goes into effect Jan. 1.

One new policy is a set of standards to prohibit slamming and cramming, marketing “techniques” which some telephone industry competitors widely employed early in the days of telecommunications deregulation.

Slamming is the practice of switching an electrical service customer from one provider to another without that customer’s authorization.

Cramming, on the other hand, is the act of billing a customer for electrical services which the customer has not authorized.

The statute which set up the step-by-step process of electrical deregulation — the Customer Choice and Electricity Reliability Act of 2000 — explicitly mandated that the MPSC issue orders against both slamming and cramming, while also giving the agency authority to investigate allegations of slamming and cramming.

The MPSC’s new procedures permit customers to request changes of service verbally, in writing or via Internet or a third party. But it requires that new suppliers provide verification of all switches in service within seven days of the requested change, and further, it requires that the verification be through a customer identification or account number.

The MPSC stipulates that no supplier may bill a customer for a service without the customer’s consent.

The new regulations permit customers and suppliers to resolve disagreements through formal or informal dispute resolution.

But the MPSC put some fairly sharp teeth into the regulation, specifically first offense fines of at least $20,000 but no more than $30,000 for a first offense, and at least $30,000 but no more than $55,000 for each offense thereafter.

But if the provider is knowingly and repeatedly violating the act, then the fine is $70,000 for each offense. Period.

The MPSC chairman, Laura Chappelle, said, “These standards involve simple and straightforward procedures that address slamming and cramming abuses without overly intruding into the process that permits customers to exercise their right to select another electric supplier.

“We’ve approved simple, concise guidelines to help promote a robust market while providing significant penalties to discourage slamming and cramming.”

In other action, the commission has deferred any decision on utilities’ requests last year to recover costs for added transmission capacity that the deregulation act mandated.

The act required Consumers Energy, Detroit Edison, the Great Lakes Energy Cooperative and Indiana Michigan Power Co. to increase available transmission capacity by at least 2,000 megawatts over their capacity as of Jan. 1, 2000.

Each of the utilities filed plans a year ago identifying the added facilities, schedules and costs needed to meet the mandate.

The MPSC says it has, in effect, passed the buck on cost recovery back to the utilities, directing that they first seek cost recovery through transmission rates which must meet the approval of the Federal Energy Regulatory Commission.

The MPSC says it concluded that if it turns out that the statutory requirement for the upgrade won’t benefit any Michigan customers, there then may be no basis under the act to approve cost recovery.

Moreover, the MPSC also indicated it was ducking the question for now, owing to the uncertainty about whether the regulatory commission might provide for cost recovery, and — even if it did so provide — the issue of how and when it would do so is equally unclear.

The MPSC also marked time about how to fund any proposal related to setting up the Low-Income and Energy Efficiency Fund that the deregulation act also mandates.

The commission reported that last month it created a “procedural framework” for “expeditiously implementing and administering initial portions” of the fund as required by the act. At the same time, it also created procedures to be used in subsequent proposals.

But it also ruled “that it is not now in a position to make specific funding decisions or identify specific projects, programs or objectives for funding.”

Instead, the commission said it intends to award grants to others to figure out what programs to undertake and how to fund them.

The MPSC announced that it will “undertake the design of specific objectives and funding priorities” by calling for “ requests for proposals” to be developed with the MPSC’s staff “in the near future.”

The agency said that requests for proposals will “provide more detailed parameters for qualifying programs and criteria for funding.”

The agency has determined that some of the criteria that must be studied include the use of funds to protect low-income electrical consumers and to promote energy efficiency. It also stresses that spending to enhance energy efficiency should “in the aggregate” benefit “all customer classes.”

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